- The Struggle Of Facing The Amazon Business Marketplace
Vendor Managed Inventory Software Benefits Local Distributors
- Competing With Amazon Using A Better Customer Service Experience
With so many benefits it sounds hard for a distributor to compete against Amazon. But it’s difficult to lose a customer when they’re needs are satisfied. This logic presents software distributors’ biggest argument as to why the implementation of VMI technology works: the accounts are hard to penetrate.
“The best benefit to the distributor about pushing VMI is that for customers that are doing it, they are never out of anything,” says Hestenes. “If they are not out of anything then they won’t order it on Amazon.”
There are two ways VMI software can be used and which direction it takes is determined by the VMI agreement between the distributor and end user.
The most common VMI approach has the distributor’s sales representative go to the end user’s location and count what’s there. Depending on the agreement, the sales representative will either enter the number of each product needed or the number of each product on the shelf — the latter is used with the goal of keeping par levels, or the minimum and maximum number the customer wants on the shelf of each product. So, if the par level for mops is at 13 and the sales rep counts eight, he or she knows to order five mops.
This approach is helpful because it benefits end users, who never have to reorder or worry about stock levels, and the distributor, who gains an edge over competitors.
“The less the customer has to think about it, the better off the distributor is,” says Hestenes. “Secondly, that puts a set of our eyes on their facility. The ‘counter’ should always be on the lookout for more opportunities.”
The second VMI method tasks the end user with doing the count, which they would report to the distributor. This method gives the end user more control, but also more responsibility, so using it is a matter of opinion and preference, says Hestenes.
The fact that a customer or sales representative can report how much a product is needed or is in stock makes the software more intuitive, says Lane. The ease of using the technology can be enhanced when a button or smart tablet is left on a wall next to a product allowing for an instant order, he adds.
VMI also boasts the capability of working with consignment processing, says Kaminstein. In consignment processing, the distributor will place inventory at the end user’s site, but will not bill for the items until they’re used. This billing is typically done at a special rate, too.
“This goes far beyond anything that Alexa or an Amazon Dash button can do, plus most commercial type customers would not use an Amazon device in my opinion; those have not been proven to have great commercial application yet,” says Kaminstein. “The use of VMI and consignment can absolutely increase the distributors ‘stickiness’ with their customers and increase the distributors’ share of the customer’s wallet.”
Kaminstein isn’t the only person to believe VMI software benefits from the fact nothing from Amazon is quite ready to challenge the capabilities of VMI.
“The less the customer has to do to order the more successful the system is for the distributor. Plus not all consumers are comfortable with relying on AI’s like Alexa,” says Paul Del Politio, marketing manager and product specialist, Universal Business Systems, Somerville, New Jersey.
When asked if there is concern that a big e-tailer might start using VMI in a fashion similar to how it’s used by distributors, Del Politio didn’t seem too concerned.
“I do not believe so as they do not have a sales force,” says Del Politio.
Lane says he couldn’t envision a scenario in which Amazon would be able to maintain inventory levels at an end user’s location well enough that they could rival VMI software use.
Distributors can employ sales representatives whose sole job is to maintain a customer’s par level. Amazon isn’t prepared to make that type of commitment and Lane doesn’t know when, and if, they would.
“The personal touch of a dedicated sales rep still goes a long way and it’s something the e-tailers are a long way from having,” says Kaminstein.
Though there is dissenting opinion as to the level of its adoption, software providers say VMI technology isn’t close to being used by most jan/san distributors. Both Lane and Hestenes say bigger jan/san distributors are much more likely to use VMI than medium and small-sized distributors. The highest estimate provided by those questioned suggested 25 percent of jan/san distributors have adopted VMI.
“I think more are aware of the concept, probably half or even more, but they haven’t had the time to devote to really understand its benefits,” says Kaminstein.
The ability to provide superior customer service and selection should be enough to help local jan/san distributors compete against e-tailers for the end user’s account in the coming years. These efforts can be further strengthened through the use of VMI software. And since there is plenty of room for VMI adoption by distributors, those who make the move earlier might reap the most benefits.
The Struggle Of Facing The Amazon Business Marketplace
Competing With Amazon Using A Better Customer Service Experience
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